Andrew Tyrie MP warns over government's regulation plans

Arguably the most powerful backbencher in the House of Commons, Conservative MP Andrew Tyrie is a fiercely independent figure.

Tyrie (pictured) has attracted attention for campaigning for victims of Equitable Life and championing the cause of extraordinary rendition.

Now chairing the Treasury Select Committee, Tyrie faces a big challenge in grappling with the coalition government’s plans for the future of regulation, banks and financial institutions.

Chancellor George Osborne cannot expect an easy ride from Tyrie, who has already boosted the committee’s power since taking over the chair in the summer by securing a veto over the appointment and dismissal of the Office for Budget Responsibility chairman.

‘Our job as a committee is to make sure the wider public interest is properly protected and that the government is forced to explain the decision it takes,’ he said.

FSA flawed from the start

Tyrie said the government needed to avoid repeating mistakes made when the Financial Services Authority (FSA) was formed as it re-shapes financial regulation.

He said flaws in the Financial Services & Markets Act, which laid down the foundations of the FSA, were apparent at the outset, arguing it created a vacuum of leadership in financial regulation.

‘I looked at it at the bill stage as legislation came through the house a decade ago,’ he said. ‘I said no one was in charge and it will be found wanting,’

A watchdog needs teeth

A front row seat for Black Monday in 1987 as a special adviser for chancellor Nigel Lawson convinced Tyrie of the need for a strong regulator. ‘The crucial lesson I learnt from that was that you needed someone in charge,’ said Tyrie.

Tyrie’s belief that financial regulation requires strong leadership is coupled with an argument for accountability. He said he is wary about Treasury plans for the Bank of England to have control over macro-prudential regulation.

‘The government needs to think this through very carefully,’ he said. ‘The governor of the Bank of England is already a very powerful figure and will be made even more powerful with the introduction of macro-prudential supervision,’ said Tyrie.

He added that the potential for tension between the Bank’s proposed financial policy committee and its monetary policy was another concern.

However, Tyrie argued that even the strongest financial regulation would struggle to cope with the sorts of strains seen during the credit crunch.

‘Charles Goodhart [economist and former MPC member] said that even if we had these arrangements in place it would only be marginally more likely that things would be better if we were faced with the same crisis all over again,’ he said.

‘Of course that ignores the fact that we know lightning does not strike twice very often in this area, but what we do know is that it does strike,’ he said.

Banking reform

Tyrie said he leans towards structural reform of the banking sector but was waiting on the verdict of Sir John Vickers’ Independent Commission on Banking.

‘We should not be one-club golfers but do something on bank capital, balance sheets, living wills, something on subordinated debt and structure,’ said Tyrie. ‘What they should be and how they relate to each other is a crucial part of the debate which we will want to engage with.’

He added that ending the myth of free banking and bringing more transparency into financial services were his long-term goals.

‘The reason people don’t change banks [is not just] because they are afraid their financial arrangement will be disturbed…but much more because they don’t how much money [the banks] are making out of you,’ said Tyrie. ‘The more transparency we can get the better. That must be of benefit to competition.’

Wisdom gained from 1970s

The Oxford-educated economist said growing up in an entrepreneurial family in the 1970s had alerted him to the impact of poor quality government on business. ‘The early 1970s were a very formative experience where I saw how businesses were destroyed by poor quality government,’ he said. ‘[My father] was a very successful retailer…I saw what it takes to start and build a business and those are my earliest memories.’

Tyrie said he believed the government’s tax policy would be crucial to creating a UK savings culture and argued for stable rules to help people save.

‘The primary responsibility for creating a savings culture lies with the government by creating a tax environment which is fair to savers,’ he said. ‘Dramatic shifts in policy are in themselves corrosive to the savings culture. So get it right and stick with it.’

CV

1981 – 1983 British Petroleum

1986 – 1990 Special adviser to chancellors Nigel Lawson and John Major

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